Saturday, September 9, 2017

Weekend reading links

1. I had blogged briefly earlier about the challenges associated with compliance with standards in Indian Railways. This is a much under-appreciated problem with most things done by governments - delivering in an environment of acute scarcity of resources, time, and capacity.

Alok Kumar Verma, a retired Railway officer, shines light on the problem and argues at how safety and speed have been crowded out by priorities of capital intensive modernisation and new trophy projects. The article deserves to be quoted at length,

The recent accident near Khatauli station on August 19, which resulted in the death of 23 passengers, is a reminder of the dangers of the excessive over-utilisation of the lines. The section where the accident occurred carries 35 trains a day against a capacity of 25 trains. Reportedly, block (temporary suspension of traffic) for carrying out repairs to a broken rail was refused... According to the latest data, utilisation exceeds the capacity on 65 per cent of busy routes. It is 120 per cent to 150 per cent on 32 per cent of the routes, and utilisation exceeds 150 per cent on 9 per cent of the routes. For optimal performance, utilisation should be 80 to 90 per cent of the capacity. Over-utilisation is leaving little time for safety inspections and essential maintenance of track and other infrastructure as well as the rolling stock. The focus of IR has shifted to daily fire-fighting, to somehow keep trains running, leading to all sorts of maladies like inter-departmental tussles and low morale. Arguably, IR has one of the highest incidences of accidents due to material, equipment and human failures.

From 1985-2000, IR acquired locomotives, coaches and wagons and carried out modernisation and upgradation of track and other infrastructure, with massive infusion of funds. But it kept deferring the last mile works (which include the easing of sharp curves, strengthening some bridges, improving track geometry to tighter tolerances, cab signalling etc.) that are needed to unlock the full potential of an upgraded network. The last mile works are tough to execute, requiring immaculate planning and precise execution. Blocks will be regularly needed for which some services may have to be diverted or curtailed temporarily. Services that can be catered to by road transport, like short distance passenger trains, shall have to be closed altogether.

A comparison with the Chinese Railway (CR) is illustrative of the magnitude of IR’s failure. Till the 1990s, the speed of trains on CR was limited to 100 to 120 km/hr. But in the 10 years (1997-2007), it undertook a “speed-up” campaign in six rounds and raised speeds to 160 km/hr on 14,000 km and to 200 km/hr on 5,370 km route-lengths. Simultaneously, the speed of freight trains was raised to 100 to 120 km/hr. With the streamlining traffic flow, line capacity was increased by 60 to 70 per cent... Indian Railways has remained stuck at 130 km/hr since 1969, while congestion on the trunk routes sky-rocketed. It’s time to shift focus to the core network that carries more than 80 per cent of the total traffic. The last mile works for upgrading the trunk routes which were repeatedly deferred should be undertaken on a priority basis so that the entire nation can realise the benefits of faster and safer travel. Else, safety on Indian Railway will only worsen.

This is a classic problem in governments. Addressing last mile gaps is unsexy and does not bring laurels. Maintenance of existing assets is invariably overlooked for new projects, where ribbons can be cut, inauguration done, and personal credits apportioned. It is the same everywhere - power transmission and distribution, water and sewerage, and all existing infrastructure elsewhere.

Let's face it. This is a big choice that Railway Ministry, led by the Government of India, has to make. Identify two or three objectives - safety, raising speeds, increasing freight - and single-mindedly pursue them for a decade or so. In doing so, the leadership will have to acknowledge the costly and often politically difficult trade-offs that are necessary.

2. Ananth points to an excellent article by Chris Balding that highlights the wave of academic censorship sweeping China and how western universities are helping its spread. He points to the decision by Cambridge University Press to take down 300 articles from its Chinese website at the request of Chinese government and writes about the choice facing Western academia and how they have chosen to respond,

It was the fact that a respected publication was bending the knee to censorship and what this represented about the broader complicity of Western organizations, universities, and academics in helping China export its academic censorship around the world... Western universities’ traditional response to criticisms on China’s restrictions on free inquiry was to claim that they could help liberalize their Chinese counterparts by establishing contact with them. What has happened instead is that they’ve ended up importing Chinese academic censorship into their own institutions. Cambridge University Press censoring on behalf of Beijing is not the first time elite British universities have opted for the bottom line over principle in accepting Chinese censorship contributions... Aiming for a diverse student body or announcing opposition to U.S. President Donald Trump’s immigration ban is a low-cost form of opposition that helps a university establish liberal credentials at home. No foreign university, however, has demonstrated willingness to show the same level of opposition to demands made by the Chinese government that it would deem unacceptable at home. The opportunities are too big, and their principles turn out to be surprisingly pliable. Western universities, academics, and publishing houses face a stark choice. If they continue to obey Beijing, they make themselves complicit in promoting censorship and human rights violations. If they walk away, they turn their backs on large revenue streams and potential donors.

I had blogged earlier here and here about the larger point that Ananth makes about the hypocrisy of the western liberals who on the one side criticise Trump (and rightly so) and cry hoarse on issues that involve no trade-offs but pliantly ignore those that inflict costs. It is one thing to demonise Russia and aggressively pursue the low-cost option of forcing the tightening of sanctions on that country. It is an altogether different thing to incur personal costs and go beyond mere bleeding heart articles and force actions on things like executive compensation or business concentration and anti-trustaction.

New America Foundation, a left leaning think tank, of which Google and Eric Schmidt are major donors was at the centre of a recent controversy. It removed Eric Lynn, a scholar who had posted an article praising the European regulator's decision to levy a $2.7 bn fine on Google on anti-trust actions, reportedly at Eric Schmidt's behest. Annie Marie Slaughter, a darling of the liberal elites for her no trade-off and "talk is cheap" views on several social issues, summoned Lynn and fired him for "imperilling the institution as a whole".

Both the protagonists, Eric Schmidt and Annie Marie Slaughter, are important, reputed, and credible voices of the liberal establishment, and their hypocrisy when faced with personal costs is what creates events like Brexit and Trump.

3. Business concentration and the rising power of monopolies has been a constant theme of this blog in recent times. Noah Smith has a very good article that summarizes the literature,

In the past few years, researchers have found that industrial concentration -- measured by the market share of the four biggest companies in an industry -- has indeed been increasing in most parts of the U.S. economy. They’ve documented a correlation between industrial concentration and a decline in labor’s share of national income. They’ve confirmed that profits have risen substantially. They’ve documented a slackening in the enforcement of antitrust law. And they’ve found some evidence that after mergers, prices go up while productivity doesn’t improve. A paper by economists Jan de Loecker and Jan Eeckhout, has caused quite a stir... find that markups -- the amount that companies charge over and above their costs -- have been on the rise since about 1980. Back then, according to the authors’ estimates, the average company charged a price that was about 18 percent above costs -- now, the number is 67 percent...

A second paper, by German Gutierrez and Thomas Philippon... look at historical episodes where competition increased -- an unusual wave of new companies in the 1990s, and increased Chinese competition in the 2000s. In each situation, industries where competition increased more also tended to invest more... Gutierrez and Philippon have another paper where they test eight different economic theories to explain falling business investment, and find that market power -- along with corporate short-termism -- is the most likely explanation. Another paper, by Gustavo Grullon, Yelena Larkin and Roni Michaely... find that in industries that have become more concentrated, profits have risen. And they verify that concentration has been caused by megamergers among public companies, not by some companies going private and disappearing from the records. A final paper, by economists Mihir Mehta, Suraj Srinivasan and Wanli Zhao, finds evidence of political influence driving antitrust enforcement. Mehta et al. discover that when a company trying to do a merger happens to be headquartered in the district or the state of a politician who oversees antitrust enforcement, the merger is more likely to be approved.

4. The gains for the Indian economy from lower oil and commodity prices have been very significant. Sample this

The decline in crude prices has led to a significant reduction in import bill from Rs 8.6 lakh crore in FY14 to Rs 4.7 lakh crore in FY17, resulting in savings of approximately Rs 8-10 lakh crore... Since crude bill is paid in dollars, this has led to a saving of foreign exchange of $150 odd billion in the last three years. The bulk of the increase in forex reserves from May 2014 to current date is on account of the above. The decline in crude prices has had a significant impact on inflation. This has resulted in an increase in disposable income of Indians by 3.3 percent of GDP as per an IMF report, which in turn has provided a boost to private consumption...

While crude oil price, inclusive of adverse exchange rate movement, has declined by 49 percent, petrol prices have reduced only by 8.5 percent... All this has led to a significant decline in petroleum subsidy bill from Rs 65,000 crore in FY14 to Rs 27,000 crore in FY17... On an aggregate, Rs 11-13 lakh crore have been savings/additional receipts to the Modi government on account of low crude oil prices. This accounts for around 3 percent of aggregate GDP of FY15-17. The higher excise duty receipts have helped GoI maintain its fiscal deficit targets.

These are very significant numbers. Without this good fortune, we may well have been staring down the abyss.

5. Ta-Nehisi Coates takes issue with the Trump-as-a-white working class reaction and frames it as Trump-as-a-white America reaction (not just to a just concluded black American presidency but a deep-rooted white supremacist belief). Sample this,

According to Edison Research, Trump won whites making less than $50,000 by 20 points, whites making $50,000 to $99,999 by 28 points, and whites making $100,000 or more by 14 points. This shows that Trump assembled a broad white coalition that ran the gamut from Joe the Dishwasher to Joe the Plumber to Joe the Banker. So when white pundits cast the elevation of Trump as the handiwork of an inscrutable white working class, they are being too modest, declining to claim credit for their own economic class. Trump’s dominance among whites across class lines is of a piece with his larger dominance across nearly every white demographic. Trump won white women (+9) and white men (+31). He won white people with college degrees (+3) and white people without them (+37). He won whites ages 18–29 (+4), 30–44 (+17), 45–64 (+28), and 65 and older (+19). Trump won whites in midwestern Illinois (+11), whites in mid-Atlantic New Jersey (+12), and whites in the Sun Belt’s New Mexico (+5). In no state that Edison polled did Trump’s white support dip below 40 percent. Hillary Clinton’s did, in states as disparate as Florida, Utah, Indiana, and Kentucky. From the beer track to the wine track, from soccer moms to nascar dads, Trump’s performance among whites was dominant. According to Mother Jones, based on preelection polling data, if you tallied the popular vote of only white America to derive 2016 electoral votes, Trump would have defeated Clinton 389 to 81, with the remaining 68 votes either a toss-up or unknown...

The focus on one subsector of Trump voters—the white working class—is puzzling, given the breadth of his white coalition. Indeed, there is a kind of theater at work in which Trump’s presidency is pawned off as a product of the white working class as opposed to a product of an entire whiteness that includes the very authors doing the pawning. The motive is clear: escapism. To accept that the bloody heirloom remains potent even now, some five decades after Martin Luther King Jr. was gunned down on a Memphis balcony—even after a black president; indeed, strengthened by the fact of that black president—is to accept that racism remains, as it has since 1776, at the heart of this country’s political life. The idea of acceptance frustrates the left. The left would much rather have a discussion about class struggles, which might entice the white working masses, instead of about the racist struggles that those same masses have historically been the agents and beneficiaries of. Moreover, to accept that whiteness brought us Donald Trump is to accept whiteness as an existential danger to the country and the world. But if the broad and remarkable white support for Donald Trump can be reduced to the righteous anger of a noble class of smallville firefighters and evangelicals, mocked by Brooklyn hipsters and womanist professors into voting against their interests, then the threat of racism and whiteness, the threat of the heirloom, can be dismissed. Consciences can be eased; no deeper existential reckoning is required...

the argument that America’s original sin was not deep-seated white supremacy but rather the exploitation of white labor by white capitalists—“white slavery”—proved durable. Indeed, the panic of white slavery lives on in our politics today. Black workers suffer because it was and is our lot. But when white workers suffer, something in nature has gone awry. And so an opioid epidemic among mostly white people is greeted with calls for compassion and treatment, as all epidemics should be, while a crack epidemic among mostly black people is greeted with scorn and mandatory minimums. Sympathetic op‑ed columns and articles are devoted to the plight of working-class whites when their life expectancy plummets to levels that, for blacks, society has simply accepted as normal. White slavery is sin. Nigger slavery is natural.

This is the central point that Coates is making,

An imagined white working class remains central to our politics and to our cultural understanding of those politics, not simply when it comes to addressing broad economic issues but also when it comes to addressing racism. At its most sympathetic, this belief holds that most Americans—regardless of race—are exploited by an unfettered capitalist economy. The key, then, is to address those broader patterns that afflict the masses of all races; the people who suffer from those patterns more than others (blacks, for instance) will benefit disproportionately from that which benefits everyone. “These days, what ails working-class and middle-class blacks and Latinos is not fundamentally different from what ails their white counterparts,” Senator Barack Obama wrote in 2006...

Obama allowed that “blacks in particular have been vulnerable to these trends”—but less because of racism than for reasons of geography and job-sector distribution. This notion—raceless antiracism—marks the modern left, from the New Democrat Bill Clinton to the socialist Bernie Sanders. Few national liberal politicians have shown any recognition that there is something systemic and particular in the relationship between black people and their country that might require specific policy solutions... Certainly not every Trump voter is a white supremacist, just as not every white person in the Jim Crow South was a white supremacist. But every Trump voter felt it acceptable to hand the fate of the country over to one... White workers are not divided by the fact of labor from other white demographics; they are divided from all other laborers by the fact of their whiteness.

It is indeed surprising that this very plausible narrative foresee has hardly found its way into the mainstream.

Given the state monopoly as it exists, I surely support the introduction of vouchers. And I do support the state financing of vouchers from general tax revenues. However, although I know the evils of state monopoly, I would want somehow, to avoid the evils of race-class-cultural segregation that an unregulated voucher scheme may introduce... We should not want a voucher scheme to reintroduce the elite that qualified for membership only because they have taken Greek and Latin classics. Ideally, and in principle, it should be possible to secure the beneficial effects of competition, in providing education, via voucher support, and at the same time to secure the potential benefits of commonly shared experiences, including exposure to other races, classes, and cultures. In practice we may not be able to accomplish the latter at all.

I had blogged earlier about Ken Arrow's cautious case for socialism. Genius is not about figuring out complicated models or crunching numbers to tease out social trends, but is about connecting research to fundamental, but glossed over, nuances of real life. There are very few such minds today.